Micron Biggest Winner as Elpida Bankruptcy Sidelines Rival: Tech

Micron Technology Inc. (MU) will probably emerge as the top winner from the bankruptcy of Elpida Memory Inc. (6665), whose filing yesterday sidelines the last Japanese maker of computer memory chips and gives rivals the chance to scoop up factories on the cheap.
Elpida filed for Japan’s biggest bankruptcy in two years after chip prices plunged and it failed to win a second government bailout. The elimination of a top maker of dynamic random access memory would give the rest of the industry more control over production, helping to ease the price swings that have left Micron unprofitable for six of the past 10 years.
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The headquarters building of Micron Technology Inc. in Boise, Idaho. Micron shares jumped 7.7 percent yesterday amid speculation that the company, the fourth-largest DRAM maker, might seek to acquire some of Elpida’s plants. Photographer: Matthew Staver/Bloomberg
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Elpida Memory Inc. memory chips are displayed in this arranged photograph in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg
Elpida’s creditors will look for ways to recoup losses through the sale of such assets as a plant in Hiroshima valued at $1 billion by Sanford C. Bernstein & Co. For potential buyers such as Micron, that price tag would be about a fifth of the cost of building a new equivalent facility. That would fit with Micron’s strategy of trying to buy up capacity cheaply, rather than making acquisitions that outstrip the company’s $1.9 billion in cash and compel it to take on debt.
“Micron is clearly the winner,” said Dan Berenbaum, a New York-based analyst at MKM Partners LP. “Now it’s a question of how much does Micron pay for the assets.”
Micron shares jumped 7.7 percent yesterday amid speculation that the company, the fourth-largest DRAM maker, might seek to acquire some of Elpida’s plants. Dan Francisco, a spokesman for Boise, Idaho-based Micron, declined to comment.
Elpida has facilities that are responsible for about 18 percent of DRAM industry output, making it the No. 3 supplier. A push to take the plants offline or use them for other kinds of chips would help ease oversupply and stem industrywide losses.